Correlation Between MicroSectors FANG and T Rex
Can any of the company-specific risk be diversified away by investing in both MicroSectors FANG and T Rex at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining MicroSectors FANG and T Rex into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MicroSectors FANG Index and T Rex 2X Inverse, you can compare the effects of market volatilities on MicroSectors FANG and T Rex and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in MicroSectors FANG with a short position of T Rex. Check out your portfolio center. Please also check ongoing floating volatility patterns of MicroSectors FANG and T Rex.
Diversification Opportunities for MicroSectors FANG and T Rex
-0.72 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between MicroSectors and ETQ is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding MicroSectors FANG Index and T Rex 2X Inverse in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on T Rex 2X and MicroSectors FANG is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on MicroSectors FANG Index are associated (or correlated) with T Rex. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of T Rex 2X has no effect on the direction of MicroSectors FANG i.e., MicroSectors FANG and T Rex go up and down completely randomly.
Pair Corralation between MicroSectors FANG and T Rex
Given the investment horizon of 90 days MicroSectors FANG Index is expected to under-perform the T Rex. But the etf apears to be less risky and, when comparing its historical volatility, MicroSectors FANG Index is 2.02 times less risky than T Rex. The etf trades about -0.02 of its potential returns per unit of risk. The T Rex 2X Inverse is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 956.00 in T Rex 2X Inverse on October 24, 2024 and sell it today you would lose (44.00) from holding T Rex 2X Inverse or give up 4.6% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
MicroSectors FANG Index vs. T Rex 2X Inverse
Performance |
| Timeline |
| MicroSectors FANG Index |
| T Rex 2X |
MicroSectors FANG and T Rex Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MicroSectors FANG and T Rex
The main advantage of trading using opposite MicroSectors FANG and T Rex positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MicroSectors FANG position performs unexpectedly, T Rex can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in T Rex will offset losses from the drop in T Rex's long position.| MicroSectors FANG vs. Direxion Daily Semiconductor | MicroSectors FANG vs. MicroSectors Solactive FANG | MicroSectors FANG vs. MicroSectors FANG Index | MicroSectors FANG vs. Direxion Daily Technology |
| T Rex vs. ProShares Trust | T Rex vs. iShares Ethereum Trust | T Rex vs. ProShares Trust | T Rex vs. Grayscale Ethereum Trust |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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